Boyd Gaming Corporation

Good afternoon, ladies and gentlemen. Thank you for attending the Boyd Gaming third quarter 2021 conference call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I will now pass the conference over to your host, Josh Herschenberg, Executive Vice President and Chief Financial Officer with Boyd Gaming. You may proceed.

Thank you, operator. Good afternoon, everyone, and welcome to our third quarter conference call. Joining me on the call this afternoon is Keith Smith, our President and Chief Executive Officer. Our comments today will include statements that are forward-looking statements within the Private Securities Litigation Reform Act. All forward-looking statements in our comments are as of today's date, and we undertake no obligation to update or revise the forward-looking statements. Actual results may differ materially from those projected in any forward-looking statements. There are certain risks and uncertainties, including those disclosed in our filings with the SEC, that may impact our results. During our call today, we will make reference to non-GAAP financial measures. For complete reconciliation of historical non-GAAP to GAAP financial measures, please refer to our earnings press release and our Form 8K, furnished to the SEC today, and both of which are available at investors.boydgaming.com. We do not provide a reconciliation of forward-looking non-GAAP financial measures due to our inability to protect special charges and certain expenses. Today's call is also being webcast live at BoydGaming.com and will be available for replay in the investor relations section of our website shortly after the completion of this call. So with that, I would now like to turn the call over to Keith Smith. Keith?

Thanks, Josh, and good afternoon, everyone. The third quarter was another outstanding quarter for our company as we achieved our fifth straight quarter of exceptional results since reopening our properties last spring. This sustained level of strong performance is the direct result of the fundamental changes we made to our operating philosophy last year. Upon reopening, we sharpened our focus on driving play from our most loyal guests. We streamlined our cost structure and we adopted a more efficient approach to doing business that touched every part of our operations. Our record third quarter performance and our results over each of the last five quarters are tributes to the transformation of our business model and the disciplined approach we have taken to operating our business. These exceptional results have significantly enhanced our free cash flow and strengthened our balance sheet with our leverage declining to 2.75 times at the end of the third quarter. As a result of our strong financial position and our prospects for continued growth, our Board of Directors has authorized a share repurchase program of $300 million, allowing us to return a portion of our robust free cash flow to our shareholders. So let's review the operating performance that helped make this possible. For the second straight quarter, revenues exceeded both 2019 and 2020 levels, setting a new third quarter record. Strong flow through resulted in an adjusted EBITDA of more than $340 million, also a third quarter record. Our quarterly EBITDA was 42% higher than the third quarter of 2020 and 60% higher than the third quarter of 2019. And our company-wide operating margins exceeded 40% for the second straight quarter. Our third quarter margin grew nearly 400 basis points over last year's record and is up more than 1400 basis points from 2019. Every segment of our business contributed to this outstanding performance. as we set new third-quarter EBITDA records in each of our three operating segments. In a Las Vegas local segment, revenues grew 35% over last year, and EBITDA was up almost 60%. Operating margins exceeded 54% and have been at or above the 50% mark every quarter this year. In downtown Las Vegas, we posted record third-quarter EBITDA of $13.2 million on margins of 31%. This is a substantial improvement over the EBITDA loss we reported a year ago and is up double digits over our record third quarter 2019 results. And in our Midwest and South segment, we set new third quarter records for both revenues and EBITDA as EBITDA grew 22% over prior year and 42% from 2019. This strong performance was broad-based as 11 of our 17 regional properties set new EBITDA records for the third quarter. Nationwide, of the 26 properties that were opened the entire quarter, 21 grew EBITDA by double digits over last year, with 18 setting new third-quarter EBITDA records. As I mentioned earlier, the record levels of revenues, EBITDA, and margins we have produced throughout 2021 are the result of deliberate actions we have taken since reopening last year, including focusing on the right customer, transforming our operating model, and implementing new capabilities and refinements throughout our business. and we are continuing to implement initiatives and technologies to enhance customer convenience, build loyalty, streamline processes, and reinforce our operating efficiency. An example of this is our Boyd Pay cashless technology, which is now live at 11 properties in four states. While initially Boyd Pay was focused on our slot product, we are quickly expanding Boyd Pay's capabilities to other areas, both gaming and non-gaming. In the next several weeks, we will be expanding Boyd Pay to the majority of our restaurants in Las Vegas. In addition, we recently launched a field trial for Boyd Pay at Table Games in Nevada, with Pennsylvania soon to follow. Our goal is to create a tool that will make it easier for our guests to make wagers and pay for non-gaming amenities right from their smartphone. We are making excellent progress toward this objective and expect Boyd Pay will become available at every Boyd Gaming property next year, pending regulatory approvals. We're also using technology to create new revenue opportunities and enhance the guest experience in other ways as well. For example, in Nevada, we recently relaunched Boyd Sports, offering an unmatched selection of vetting opportunities through the most expansive wagering menu in the state. We are pleased with the customer reception so far, with strong increases in activity from both new and reactivated guests. Beyond these new initiatives, we also have additional organic growth opportunities available throughout our operations. Across the country, many of our hotels have been running below capacity since reopening due to a tight labor market. As a result, we have not been able to accommodate many rated customers who have established gaming histories with us. As the labor market normalizes, we will be able to bring more hotel rooms online, driving gaming revenue growth from these customer segments. In downtown Las Vegas, we anticipate continued growth as tourism throughout the city recovers and Hawaiian visitation improves. We also have opportunities for future growth in our midweek business and our meeting and convention business. Overall, we expect to see further recovery and visitation throughout our portfolio as restrictions are lifted, COVID numbers improve, and travel resumes. On top of our organic growth opportunities, we are well positioned for further gains in the digital space. We view online gaming and online casinos in particular as a strategic growth opportunity for our company. With gaming operations across 10 states and a strong player loyalty program, we have the foundation to build a robust digital complement to our land-based casino operations. Our iGaming operations are off to a good start in both Pennsylvania and New Jersey, where our Stardust-branded online casinos have delivered strong results since launching in April. Expanding our iGaming operations is a strategic priority for our company, and we will look to further build our online casino capabilities and geographic presence over time. In sports betting, our partnership with FanDuel continues to grow. Our current focus is Louisiana, where we are preparing to launch sports betting at our five properties in that state by year-end, pending regulatory approval. Once live, this will extend our partnership with FanDuel to six of our nine regional states. In all, We expect our digital operations, including sports, casino, and social casino, will generate more than $20 million in EBITDA this calendar year. Digital is a profitable business for us today, and it will be an increasingly important part of our overall strategy in the years ahead, generating incremental revenue and EBITDA for our company, expanding our customer base, and importantly, building loyalty among our guests by providing us another opportunity to engage with them. We also continue to benefit as a 5% equity partner in FanDuel's accelerating expansion across the country and their position as one of the leading online sports and casino operators in the country. Since our last call, FanDuel has launched new sports betting operations in Arizona and Connecticut and expects to go live in Maryland, Washington State, and Wyoming by the end of the year. Sports betting operations in 15 states by year end, FanDuel is a clear leader in the expansion of digital gaming and we are participating in its success as an equity owner and a partner. While the opportunity in digital is substantial, we also have strategic opportunities to further expand our traditional gaming operations. In Northern California, construction on the Wilton Ranch Area Tribe's Sky River Casino is progressing well. The steel structure was topped off last month, and we are quickly moving forward with both exterior and interior construction. This project remains on time and on budget, and we are on track to open Sky River early in the fourth quarter of next year. And in Louisiana, we continue to make progress on development plans for a new land-based facility at Treasure Chest Casino, featuring expanded gaming space and significantly upgraded non-gaming amenities. Treasure Chest has been a strong performer for years, and this project will allow us to further enhance a property that is already producing strong results. Before turning it over to Josh, I want to provide an update on our ESG initiative. Since issuing our first ESG report earlier this year, we have convened teams of corporate and property executives to focus on a number of strategic ESG initiatives, including reducing our water and energy consumption, lowering our carbon footprint, encouraging employee volunteerism and workplace giving, enhancing the diversity of our workforce, and refining our responsible gaming efforts. We look forward to providing you with an update on our progress in next year's ESG report. We also continue to support our communities during times of need, as we did after Hurricane Ida struck South Louisiana in late August. To assist our South Louisiana communities with their recovery effort, Boyd Gaming made a significant contribution to our partners at Second Harvest Food Bank, helping them provide much-needed food and water to thousands of local residents in the immediate aftermath of the storm. At the same time, we extended full pay and benefits to our team members at Treasure Chest and Amelia Bell while those properties were closed following the storm. We also provided immediate cash benefits to all of these employees, and we are providing additional relief as needed through the Boyd Gaming Team Member Crisis Fund. Giving back to our communities and being a responsible corporate citizen have always been core tenants of our company. We're proud to uphold that commitment after Hurricane Ida, and we will continue to honor that commitment as a central part of our company's ESG philosophy. In summary, After our fifth strong quarterly performance in a row, we have great confidence in our future and our ability to grow our business. Our restructured operating model and our tight focus on the right customer are delivering exceptional results. Companywide EBITDA has exceeded the billion-dollar mark in just nine months, with margins significantly higher than pre-closure levels. We are confident that this level of performance is sustainable and that we will maintain much of the margin improvements we have achieved over the last 18 months. Our free cash flow has more than doubled, and our balance sheet is the strongest it has ever been, giving our board the confidence to authorize a new share repurchase program. And we have opportunities for incremental growth ahead. As the pandemic fades, additional visitors will return to our properties. As the labor market normalizes, we will be able to bring more hotel rooms online, increasing our capacity to host profitable customers. and we will further leverage our nationwide portfolio, our extensive customer database, and our partnership with FanDuel to continue expanding our digital business. We are well positioned for the future, and while our recent success is a result of our transformed operating strategy, it is also a tribute to the strength of the entire Boyd Gaming team. Our team members are successfully executing the strategy that is creating these exceptional results. I cannot say enough about their dedication and effort over these past 15 months in dealing with the COVID pandemic and an uncertain environment. It is an honor to lead this team, and we look forward to continued growth and success in the months and years ahead. Thank you for your time this afternoon. I'd now like to turn the call over to Josh. Josh?